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Inside FHA/VA Lending

January 1, 2016

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Ginnie Pools Likely to See Rising Share of VA Collateral in 2016

Investors should see a higher share of VA collateral in Ginnie Mae mortgage-backed securities pools due to increasing VA loan originations, according to Deutsche Bank analysts. Given their rising share of VA collateral, new Ginnie pools are likely to have worse convexity than most of those originated in 2015, analysts said. “VA loans tend to prepay faster than FHA loans when in the money as VA loans have larger loan sizes, higher FICO scores and a more efficient streamline refi program that requires a minimum three months seasoning,” they observed. In addition, analysts expect the population of younger veterans to surge approximately 36 percent over the next five years. “[As such], there will be a healthy supply of new VA originations eligible for pooling,” they said. As a result, the share of FHA relative to VA collateral in new Ginnie II pools will likely decrease, they said. Such a trend has manifested itself slowly as ... Read More

HECM Endorsements Up in 2015, Increase Due to Program Changes

FHA lenders funded $12.3 billion in new Home Equity Conversion Mortgage loans during the first nine months of 2015, up a hefty 22.2 percent from the same period in the prior year, according to Inside FHA/VA Lending’s analysis of agency data. Likewise, HECM endorsements increased 17.3 percent to $4.5 billion in the third quarter from $3.9 billion in the prior quarter. This was the highest HECM endorsements have been since the second quarter of 2013, when they totaled $4.1 billion. Purchase loans accounted for 85.8 percent of all HECM originations over the nine-month period. The majority of borrowers favored adjustable-rate HECMs over fixed-rate HECMs, which accounted for only 14.8 percent of HECM transactions. In addition, the initial principal amount at loan originations totaled $7.3 billion, up from $4.6 billion midway through 2015. The volume increase is attributable to program changes implemented ... [1 chart] Read More

FHA Urges Calendar-Year Lenders To Begin Recertification Early

Nearly 2,400 FHA lenders will receive electronic notifications on Jan. 1, 2016, from the Department of Housing and Urban Development instructing them to begin their recertification process or risk exclusion from the FHA program. HUD is encouraging the estimated 85 percent of FHA lenders that operate on a calendar-year basis, instead of a fiscal-year basis, to prepare their recertification packages for submission to the Lender Electronic Assessment Portal (LEAP). LEAP allows FHA lenders to complete annual recertification, among other things. The portal is accessible through FHA Connection, which provides lenders and business partners a path to HUD’s computer systems. Annual recertification can be a lengthy, time-consuming process for ... Read More

VA Loan Limits Stay Same in 2016, Guaranty Based on One-Unit Limit

The Department of Veterans Affairs has announced its loan limits for 2016, which are the same as the loan limits set by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac this year. Currently, the VA’s maximum guaranty amounts are indexed to the FHFA loan limits, which range from a base of $417,000 to a high-cost area limit of $625,500. The FHFA conforming loan limit will remain unchanged at $417,000 for single-family homes, effective Jan. 1, 2016, to Dec. 31, 2016. However, in 39 counties deemed “high cost,” the conforming loan limits will increase this year. VA loan limits are calculated based on the county median home values reported by FHA. The maximum guaranty amount for loans over $144,000 is 25 percent of the current VA county loan limit. Veterans with full entitlement available may borrow up to this limit and VA will guarantee 25 percent of the loan amount. In addition, the VA county limits ... Read More

Ginnie Mae Securitization of USDA Loans Up During First Nine Months

A total of $13.6 billion of rural home loans backed by the U.S. Department of Agriculture were securitized during the first nine months of 2015, according to an Inside FHA/VA Lending analysis of agency data.An estimated $5.1 billion of USDA home loans were delivered into Ginnie Mae pools in the third quarter, up 22.8 percent from the prior quarter. In contrast, the nine-month securitization volume fell 4.4 percent from the same period of the prior year. Nine of the top 10 USDA loan securitizers reported quarter-over-quarter increases. Top-ranked Chase Home Finance maintained its lead over other USDA loan securitizers with $4.2 billion in loans securitized during the nine-month period, down 4.8 percent from the previous year and up 32.8 percent on a quarterly basis. Chase’s nine-month USDA volume translated into a 31.0 percent market share. Second-place Wells Fargo funneled $1.7 billion in USDA loans into ... [ chart ] Read More

VA to Propose Rule Changes on Fees, LDPs, Appraisers, Income

The Department of Veterans Affairs is planning to propose changes to rules under its Home Loan Guaranty program related to loan fees, appraisers, limited denial of participation and residual income. Three of the proposed rules are slated for publication in the first quarter of 2016, according to the VA’s semiannual regulatory agenda. Agenda items, however, usually do not follow their publication dates and most rulemakings take a while before they are finalized. One proposed rule would establish reasonable fees that VA lenders may charge in connection with the origination and servicing of VA loans. All proposed fees would be in line with those charged by private mortgage lenders, assuring the sustainability of the VA loan program, the agency noted. In addition, the VA plans to propose rule changes regarding limited denials of participation (LDPs). LDPs are VA-specific sanctions that the Loan Guaranty Service may ... Read More

HUD to Propose Policy Changes, Finalize Rules in First Half of 2016

The FHA has several measures in the regulatory pipeline primed for proposal and final action in the first half of 2016, according to the Department of Housing and Urban Development’s semiannual regulatory agenda. The regulatory agenda, however, comes with a caveat: action dates and rulemaking timelines are tentative, depending on the urgency of the rule. HUD plans to propose a rule in February that would codify program changes over the past two years in the Home Equity Conversion Mortgage regulations. The updated HECM policies and requirements address financial assessments, property charges, lien seasoning, non-borrowing spouse certifications and deferral periods. Also included in the codification proposal are revised rules pertaining to partially funded life expectancy set-aside and servicing fee set-aside. In addition, the proposed rule would make several other changes to HECM origination and servicing to ... Read More

Lenders’ Mitigation Efforts Reduce Share of ‘Unacceptable’ Mortgages

The share of “unacceptable” ratings for defective FHA loans following a post-endorsement technical review has dropped from double- to single-digits in FY 2015 due to lenders’ mitigation efforts, according to the FHA’s latest loan-review results. FHA’s initial unacceptable rate has remained at 45 to 47 percent over the last four quarters, but lender submission of mitigating documentation has reduced that rate to 5 percent as of Oct. 31, 2015, the FHA report said. This means an overall mitigation rate of nearly 90 percent of the FHA-insured loan sample. The number of initially unacceptable findings and those findings subsequently mitigated are based on 6,415 FHA-insured mortgages that underwent post-endorsement technical reviews between April 1 and June 30, 2015. Of the total loans reviewed, 68.6 percent were purchase loans, 17.9 percent streamline refinance and ... Read More

Joint Enforcement Actions Result In Huge Recoveries for FHA in 2015

Joint civil fraud initiatives have resulted in $558.5 million in recoveries and receivables to the Department of Housing and Urban Development in FY 2015, according to the HUD inspector general’s semiannual report to Congress. The amount includes civil settlements of $212.5 million from First Tennessee Bank, $29.6 million from Reverse Mortgage Solutions, and $1.8 million from three other settlements. The settlements resolved enforcement actions brought by the Department of Justice on behalf of HUD in pursuit of civil remedies under a variety of statutes, including the False Claims Act, Program Fraud Civil Remedies Act, and the Financial Institutions Reform, Recovery and Enforcement Act. Recoveries and receivables for other entities during the reporting period – April 1 to Sept. 30, 2015 – totaled $86.9 million and $268.2 million for the entire fiscal year. Some of the payments were made to the ... Read More

State HFAs Favor RHS’ Proposal to Cut Wait Time for Claims Process

State housing agencies have expressed support for a proposed rule change by the U.S. Department of Agriculture’s Rural Housing Service that would expedite claim submission, but sought clarification on certain provisions. The proposed rule would amend the USDA’s current rules on liquidation-value appraisals under the agency’s Section 502 Single Family Housing Guaranteed Loan Program. Currently, if a real estate-owned property remains unsold by the lender at the end of a prescribed marketing period, the RHS will order a liquidation value appraisal to estimate the cost of holding and disposing of the REO. However, several housing finance agencies have complained about the RHS’ lengthy claims process, which forces them and other lenders to keep unpaid claims on their books longer than necessary. “Such lengthy waiting periods can be particularly costly to HFAs and other ... Read More

Around the Industry

VA Servicer Reminders. The new maximum allowable foreclosure timeframes published in the Federal Register on Dec. 4, 2015, will be effective for all loan terminations completed on or after Jan. 3, 2016. In addition, the new Net Value percentage (15.95 percent) took effect on Dec. 23, 2015. All Notices of Value issued on or after Dec. 23, must be calculated using the new percentage. Meanwhile, pre-approval requests to deviate from a regulation must be submitted through VALERI (VA Loan Electronic Reporting Interface), the agency’s loan administration system. VA does not grant pre-approval on claim expenses or for additional time to foreclose. These items must be appealed ... Read More

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